Bank deposits increase to record high of Rs14.63 trillion

Bank deposits increase to record high of Rs14.63 trillion

KARACHI: The deposits of banking system have increased to all time high of Rs14.63 trillion by December 2019, according to data released by State Bank of Pakistan (SBP).

The deposits have increased by 9.58 percent to Rs14.63 trillion by December 2019 as compared with Rs13.35 trillion in the same month of the last year.

Analysts at Topline Securities on Friday said that the deposit growth came in better than last year’s growth of 8 percent, however remained lower than the 5-year average growth of 12 percent.

Banks’ focus for deposit mobilization remained more towards investments compared to advances during the year given the high yields on government papers. As a result, investments grew by 16 percent to Rs8.8 trillion in 2019, with IDR increasing to 60 percent in 2019 from 57 percent in 2018.

On the other hand, advances grew by just 3 percent in 2019 hindered by high interest rates and slowdown in overall economic activity. Over the past 3-years, advances have grown at an average of 19 percent.

Interestingly to note, advances growth remained more subdued in 9M2019 with growth of just 1 percent YTD, however somewhat picked up in the last quarter to close at Rs8.80 trillion, they said.

As a result, ADR dropped to 56 percent in 2019 from 59 percent in 2018.

Sector-wise, Textiles (12.5 percent), Energy (17 percent), Individuals (8.8 percent) and Agribusiness (8.1 percent) accounted for 46 percent of total advances.

As per the available 9M2019 numbers, advances to textile sector declined the most by 6.5 percent (Rs75 billion), while advances to the energy, individuals and agribusiness sectors increased by Rs34 billion, Rs19 billion and Rs4 billion, respectively.

The Currency in Circulation (CIC) in 2019 registered an increase of 19 percent to Rs5.39 trillion. Additionally, CIC as a percentage of M2 clocked in at 29 percent above the historic 5-year average of 27 percent.

Going forward, we see deposit growth in the range of 10-12 percent and advances growth of 11-13 percent in 2020 at the behest of economic recovery and an expected decline in interest rates.

We are presently Market-Weight on the banking sector with Meezan Bank (MEBL) our top pick. We also like Habib Bank (HBL) and Bank Al Falah (BAFL).

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